The demand curve for haircuts at Terry Bernard’s Hair Design is
P = 20 – 0.20Q
where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of $15. Terry is unwilling to raise price if the price hike will cause revenues to fall.
a. Should Terry raise the price of haircuts above $15? Why or why not?
b. Suppose demand for Terry’s haircuts increases to P = 40 – 0.40 Q. At a price of $15, should Terry raise the price of her haircuts? Why or why not?

  • CreatedNovember 18, 2014
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